Every month, we ask our freelance writers to share their top ideas for dividend stocks with you — here’s what they said for November!
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Aviva
What it does: Aviva is a diversified insurer with offerings across insurance, wealth and retirement.
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By Andrew Mackie: For me, dividend investing should not be complicated. That means identifying easy-to-understand businesses that generate significant cash flows and prioritise shareholder returns. Aviva (LSE: AV.) ticks all the boxes in this respect.
It offers a market-beating dividend yield of 6.8%. This is expected to rise to 7.3% in 2024 and to 7.8% in 2025. Supporting this growing payout, is strong momentum across key financial metrics. In its H1 results in August, operating profit was up 14%, own funds generation (OFG) 10%, and cash remittances 16%.
As a leading UK insurer, it is well placed to take advantage of several structural growth opportunities. For example, over the next 10 years the pension savings market is expected to triple to £5trn. Ancillary services such as pensions advice, is likely to piggyback off this.
Providing insurance services is an inherently risky business, and identifying emerging risks is likely to become increasingly complex. The all too obvious effects brought upon by climate change is one such evolving risk. Should it misprice a risk, the potential to cause catastrophic losses can never be ruled out.
Andrew Mackie owns shares in Aviva.
Henderson Far East Income
What it does: The fund invests in stocks from the Asia Pacific region to achieve sustainable income and capital growth.
By Jon Smith. The Henderson Far East Income (LSE:HFEL) stock has an enviable track record of having a dividend yield of 10.34% as well as a share price that has rallied by 11% over the last year.
The investment manager (Janus Henderson) picks stock primarily from the Asia Pacific region. Thanks to the fresh round of Chinese stimulus over the past month, the portfolio has done well in the short term. In targeting shares with a high dividend yield, it’s able to sustainably pay out income. The dividend per share has increased on the trot for several years now.
One concern is that the dividend cover for the past few years has been around 1. Although this means that the dividends are covered completely by the latest earnings, it doesn’t give a lot of breathing room if the firm has a bad year.
Jon Smith does not own shares in Henderson Far East Income.
Legal & General
What it does: Established in 1836, Legal & General is one of Europe’s largest insurance and asset management groups.
By James Beard. Legal & General (LSE:LGEN) has increased its annual dividend during 14 of the last 15 years. The only exception was in 2020, when it was left unchanged due to the pandemic. Positively, with a strong balance sheet and a £24bn active pipeline of potential pension fund transfers, the directors have pledged to increase the payout by 2% a year through until 2027.
But the group’s vulnerable to an economic downturn. And it operates in highly competitive markets. I also think it’s worth keeping an eye on its assets under management, which fell during the first six months of 2024.
However, due to its impressive track record of dividend growth, current yield of 9.3% and a forward (2024) price-to-earnings (P/E) ratio of 11.9 — which is broadly in line with its average over the past 10 years — it remains on my watchlist for when I’m next in a position to invest.
James Beard does not own shares in Legal & General.
